Morrisons - comment

Selling the forecourt business is a positive for leverage at Morrisons, but as we said yesterday, the reduction is less than we expected. Also, the amount of cash Morrisons will receive is still uncertain. The £1.95bn in cash includes a £650m Preferred Equity piece that Morrisons is trying to sell to a third party. Morrisons claims to be close to completing a sale, but we can see it having to offer a discount to get the deal done. Assuming the Pref disposal happens, leverage falls to 5.7x, in line with the 5.8x in our model. Morrisons does not intend to monetise its stake in MFG as it sees the 20% holding as strategic. The Q4 results were broadly in line with our expectations. We are in the process of updating our model and will publish an update soon.  Our core thesis is that the Preference Equity tranch gets sold, possibly at a modest discount and that operational performance at Morrisons will continue to improve. So, despite the lower cash component in the sale we continue to like both the SSNs and SUNs.